2 views on high-speed rail | Derail it: Taxpayers would be on the hook

January 21, 2011|By Wendell Cox | Guest columnist

As Gov. Rick Scott contemplates the proposed high-speed rail system from Tampa to Orlando, some argue it is simply too good a deal to pass up.

After all, federal taxpayers will pay $2.4 billion of the $2.7 billion estimated price tag, leaving "just" $280 million for Florida taxpayers — unless the rest is paid for by the successful bidder on the rail project.

The history of big rail projects, however, indicates Florida taxpayers would be fortunate if the final tab were only $280 million.

A team led by Oxford University Professor Bent Flyvbjerg studied more than 258 infrastructure megaprojects across the world and found passenger-rail systems experience cost overruns of 45 percent on average. If the current Tampa-Orlando cost estimate is off by that average — 45 percent — the project would need an additional $1.2 billion. Who would pay for that? Florida taxpayers or the builder?

When you consider that the Tampa-to-Orlando line's estimated construction cost per mile is less than half of the first segment of California's proposed high-speed rail line, it's hard to see how Florida can build the train system so cheaply.

California's anticipated cost is $67.8 million per mile, compared with $32.1 million per mile in Florida.

The Tampa-to-Orlando line has two things going in its favor in the comparison to California: Right-of-way has largely already been obtained, and there will be less construction on viaducts.

But California's Central Valley construction will take place in far more rural and less challenging environments than the Tampa-to-Orlando line. And Florida plans to build five expensive high-speed rail stations, while California plans to build only two cheaper Amtrak-quality stations.

Additionally, California isn't factoring in the cost of trains, electricity infrastructure, train yards or maintenance facilities — all of which will raise its final price tag even further. And yet, despite leaving all those things out, California's cost per mile is still more than double Florida's pie-in-the-sky estimate.

Just as worrisome: These types of large rail projects don't just cost more than expected to build; they cost more to operate. Flyvbjerg's research finds: "There is a massive and highly significant problem with inflated forecasts for rail projects. For two-thirds of the projects, [ridership] forecasts are overestimated by more than two-thirds."

If high-speed rail ridership doesn't meet projections, taxpayers could see the rail system lose $300 million over the first 10 years of operation. It is hard to see how the Florida rail system is going to reach its predicted number of riders. It will provide virtually no intercity travel-time advantage compared with cars.

And it would cost more than driving (a lot more if you have to hail an expensive taxi or rent a car to get from the train station to your ultimate destination, as would be the case for many trips).

Obviously, Florida could be spared these potential costs by canceling the rail project. But, if the lure of federal funding proves irresistible, the state must provide ironclad provisions to limit taxpayers' financial exposure to $280 million or less. As it has suggested it will do, the Florida Department of Transportation needs to ensure that the private builder-operator is responsible for any construction overruns and operational losses.

And if the state insists on moving forward with the plan, the independently operable Orlando tourist-shuttle segment (Orlando International Airport to International Drive and Walt Disney World) is the one section that should be initially built. Then, if — and only if — there is enough money left over, the full extension to Tampa could be completed.

A century of rail projects shows they cost more than estimated and generate fewer riders than predicted. Florida taxpayers need to make sure they don't hand over a blank check that puts them on the hook for endless cost overruns and annual financial losses if the train system's rose-colored forecasts don't pan out.

Wendell Cox is principal of Demographia, a consulting firm based in St. Louis, Mo., and author of a recent Reason Foundation study of the financial risks to taxpayers in Florida's proposed high-speed rail system.